Berlin is rethinking its policy toward Beijing as economic gravity overrides ideological distance.
When Chancellor Friedrich Merz landed in Beijing late last month for his first official visit to China, the symbolism was unmistakable. He joined a growing procession of Western leaders – following French President Emmanuel Macron in late 2025 and British Prime Minister Keir Stormer in early 2026 – seeking face time in the Chinese capital. Donald Trump is also expected in Beijing at the turn of March and April.
This choreography reflects a broader geopolitical reality: amid fears of a two-front trade war with the world’s two superpowers, Western Europe’s major economies are confronting and reevaluating the logic of economic fragmentation.
Merz’s visit unfolded against three converging pressures. Germany faces domestic economic stagnation, turbulent transatlantic relations and a deep need to rethink its relationship with China. Berlin’s former pulse “De-risking” And “Decoupling” Born out of geopolitical anxiety. But as the costs pile up — industrial contraction, shrinking export markets and competitive erosion — Germany’s political establishment appears to have reached a sobering conclusion: strategic decoupling from China is not a viable long-term policy for the EU’s largest economy.
The dual objectives of the visit were clearly articulated. On the one hand, Berlin sought to strengthen economic and trade cooperation. On the other hand, it aims to conduct substantive consultations on international issues ranging from global supply chains to financial stability. Beneath the diplomatic language lies a fundamental tension. Beijing has consistently raised concerns about the over-securitization of economic ties and Western export restrictions on high-tech products. Germany, meanwhile, is reducing dependencies, addressing trade imbalances and tightening export controls. These positions are not easily reconciled, but they are no longer considered grounds for disengagement. Instead, they are becoming a topic of conversation.
The economic context is critical. China will once again become Germany’s largest trading partner in 2025, replacing the US, as it did from 2016 to 2023. €170.6 billion worth of goods flowed from China to Germany – an 8.8% annual increase – while German exports to China fell by 9.7% to €81. Merz openly admits that the imbalance is significant and that the trade deficit with Beijing will quadruple from 2020. Yet the broader message is unmistakable: Despite the political rhetoric, economic gravity pulls Berlin eastward.
Germany’s woes are particularly visible in the automotive sector. Once an undisputed symbol of German industrial dominance, the industry now faces formidable Chinese rivals in electric vehicles. Chinese manufacturers are setting the pace in battery integration, software ecosystems and price competitiveness. For German firms, China is no longer just a market; It is a laboratory of innovation and a benchmark for technological transformation. The strategic question is not whether to engage, but how.
Merz did not travel alone. His delegation included around 30 senior business leaders – heavyweights from Volkswagen, Siemens, BMW, Bayer and Adidas – one of the largest German corporate contingents to visit China since the Angela Merkel era. The message was straightforward: German industry considers the Chinese market indispensable. According to the German Chamber of Commerce and Industry, more than half of German enterprises in China plan to deepen ties through strategic partnerships or joint ventures. The private sector has effectively voted against decoupling.
Diplomatically, the visit yielded tangible results. The meetings with President Xi Jinping and Premier Li Qiang culminated in a joint statement and the signing of cooperation documents spanning the green transition, customs procedures, sports and media. The headline commercial announcement was China’s planned purchase of 120 Airbus planes, a deal with clear symbolic and financial weight. Large-scale procurement contracts not only stabilize supply chains, but also reinforce interdependence at a moment when fragmentation seems to be the global norm.
Merz articulated the underlying philosophy with remarkable candor. Germany, he said, wants to continue to benefit from free markets. Strong Chinese domestic demand – potentially facilitated by moderate currency appreciation – will ease trade tensions and reduce structural imbalances. Implicit in this formulation is Berlin’s recognition that forced decoupling would disproportionately harm Germany. In a global economy where value chains are deeply intertwined, sudden isolation is economically irrational.
Beyond Beijing, Merz traveled to Hangzhou to visit Unitree Robotics, a leading robotics company in China. The stop was more than a ceremony. It signaled China’s adoption of technological dynamism and competitive edge in advanced manufacturing and AI-driven automation. Germany’s industrial model relies on technological leadership. Observing China’s rapid rise firsthand underscores the futility of trying to isolate such capabilities through restrictive measures. Learning, adopting and co-developing norms can prove more effective than defensive retreat.
Xi Jinping, for his part, framed the relationship in strategic terms. While China supports Europe in gaining greater autonomy and strength, they encourage the pursuit of a partnership based on openness, inclusiveness and mutual benefit. The language aligns with the EU’s own discourse on strategic autonomy. In a volatile international environment and a mode of fragmentation, Western Europe’s ability to maneuver independently is constrained if defined exclusively through confrontation with China or alignment with US policy.
The broader geopolitical backdrop sharpens the stakes. Transatlantic relations are entering another period of uncertainty. Protectionist trends within the EU complicate internal consensus. Germany, the EU’s largest economy and China the world’s second largest – Germany is third globally – have disproportionate weight in shaping Eurasian economic flows. Their bilateral dynamics influence not only trade volumes but also regulatory norms, technological ecosystems and financial architecture.
phrase “Cold Politics, Hot Economics” Captures the paradox. Political mistrust persists, fueled by security debates and human rights concerns. Yet economic interdependence continues to deepen. The emerging approach is not naive compatibilism but calibrated pragmatism. Future cooperation is likely to adopt a hybrid model: maintaining competition while expanding collaboration in areas of shared interest. Instead of a simple buyer-seller dynamic, Berlin and Beijing could pursue joint standard-setting on new energy technologies, AI governance frameworks and financial market opening.
Merz’s pledge to restart the government-to-government dialogue mechanism stalled by the Covid-19 pandemic illustrates the shift from symbolic distance to constructive engagement. Organizational dialogue minimizes miscalculation and provides a venue for resolving grievances before they escalate into trade disputes. In a fragmented regime where multilateral frameworks are under pressure, bilateral mechanisms regain strategic importance.
None of this resolves the conflict. Trade imbalances remain politically sensitive. European concerns over market access and industrial subsidies persist. Chinese objections to export controls and trade security continue. But the recalibration underway in Berlin indicates a recognition that confrontation without a viable alternative market architecture is unsustainable.
The German political establishment appears to have internalized basic arithmetic. A disengagement from China will not restore industrial competitiveness, lower energy costs or revive export growth. Rather, it compounds economic vulnerability at a time of limited domestic fiscal space and demographic stress. Strategic partnerships, by contrast, offer leverage: access to a broader customer market, participation in fast-moving technological ecosystems, and influence over emerging global standards.
In this sense, Merz’s visit marks less a pivot than a normalization. An era of theoretical exuberance about economic isolation is giving way to a practical recalibration. Berlin is accepting sanctions and recalculating interests. In a world defined by volatility and competition, rigid binaries are an expensive luxury.
The German-Chinese relationship remains complex, shaped as much by competition as by cooperation. But the underlying purpose of Berlin’s renewed engagement is much clearer. Facing economic headwinds and geopolitical fragmentation, Germany is rediscovering that sustainable prosperity requires strategic balance rather than strategic rupture. The recalibration now underway may not resolve every tension, but it reflects a simple recognition: engagement is not weakness.
